Recession of 2009

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Signs of an impending recession in the United States and elsewhere were already apparent by the middle of 2008, and the subsequent development of the financial crash of 2008 has led investors to fear that it would be worse than previously expected. The resulting loss of confidence by investors and consumers is forecast to contribute further to the severity of an expected global economic downturn that is here tentatively referred to as the Recession of 2008

Background

Forecasts

IMF October 2008

In October 2008, the International Monetary Fund forecast that world growth would begin a slow recovery at the end of 2009, after falling from its 2007 growth rate of 5.0 per cent to 3.9 per cent in 2008 and 3.0 per cent in 2009 (the lowesr rate since 2002). [1].

The forecast was based on three main assumptions:

  • that commodity and oil prices would stabilize, relieving pressure on inflation and giving more room for expansionary policies;
  • that U.S. housing prices and activity would hit bottom next year, leading to a recovery of residential investment; and
  • that the measures then being taken would prevent further deterioration of conditions in the financial system.

The "emerging and developing countries" were expected to be the main source of world growth, with a 2009 growth rate of 6.1 per cent compared with 0.1 per cent for the United States and 0.2 per cent for Europe.

The authors added that the uncertainties were unusually great and that there were considerable downside risks.

Outturns

References

  1. World Economic Outlook, International Monetary Fund, October 2008. [1]